Where to Start Faced with Populist Journalism

The Economist’s 1843 magazine recently published an article, ‘The Mystery of the Missing £50 Billion’. It tells the story of a young lady caught at Heathrow with five suitcases containing nearly £2 million in banknotes. The article goes on to say that central bankers don’t try and work out where non-transactional banknotes are, the missing £50 billion, because of the loss of seigniorage if banknotes were not used for criminal activity.

The article suggests the different answers to where the money is by the Bank of England, Federal Reserve and European Central Bank are risible and in reality they just aren’t interested. The author quoted Andrew Bailey, Chief Cashier in 2009, who had suggested the cash paradox could be explained by a loss of confidence in banks during the financial crisis combined with a boom in ATMs requiring bigger cash holdings in the supply chain.